Enterprise Resource Planning first appeared in the 1990s and has since been running everything—from purchasing, sales, accounting, and payroll to HR— while also helping organizations collect, manage and interpret what’s now the most lucrative source of value in the digital age—data.
But where do these critical systems stand now with businesses poised to emerge from the pandemic?
RGP’s VP, Business Technology Leader, Kathy Pazely, recently provided insights into this and other questions on where this $4 billion market is headed and how ERP will likely be more important than ever as businesses continue the process of digitization and migration to the cloud.
Her Q&A follows:
What are the key drivers for implementing or upgrading an ERP system?
Most ERP systems today are around 10 or 15 years old, but it’s not the age of the systems that’s the issue. It’s usually triggered by a change in their business requirements.
With the pace of change in business today evolving so quickly, maybe it’s because of a change in the economy, or acquisitions, divestitures, etc. As a result, your whole business model has changed and evolved, but your systems need to keep pace. So that’s usually the main driver.
How did the pandemic influence clients’ planning and timeframes? What special challenges did the trend towards remote work present for managing these processes?
Early on in the pandemic, our clients were transitioning quickly to remote work. They then put everything on hold, worked to preserve cash, and made sure their teams understood how to get their jobs done in this new environment. Once remote work became the norm in many cases, it actually became easier for us to expand virtual consulting so we could support clients from anywhere, and they quickly learned how to adapt. It turned out to be beneficial because consultants weren’t traveling every week and were instead getting projects done from home, saving clients time and money. It’s an open question whether we’ll ever need to go back to that kind of travel again, with virtual consulting proving such a success.
What are the biggest challenges companies face when starting an ERP implementation?
It’s critical to take a top-to-bottom look at your business and understand what your business requirements are now—and what they will likely be in the future.
In the 1990s and early 2000s, all of these big ERP implementations sounded great. But people weren’t willing to make those hard decisions and change their business processes. As a result, they customized the heck out of their ERP systems which made them really costly to maintain and upgrade.
Today’s a different story.
As you move to the cloud, perhaps the biggest challenge is changing your mindset and being willing to accept the standard processes and functionality that the vendor gives you, which are more mature these days. But you still have to be willing to make that leap. The hardest part can often be dealing with your user community and getting them to accept and adapt to the change.
What do companies tend to overlook that can lead to mistakes or surprises?
First, for any change management initiative to succeed, you need leadership sponsorship at the top and active communications throughout the organization. Companies used to strike these two items off the list early. Not anymore. Many have learned from experience that they need to invest in both.
Second, you need clean and relevant data as well as a full understanding of the timeline. Designing and configuring the application is one of the easiest parts of the process. Even building interfaces is pretty easy. But getting the data correctly cleansed, uploaded, and reconciled? That’s usually the longest pole in the tent for your project timeline and requires a lot of time and effort that needs to be properly budgeted.
How does change management work specifically with ERP implementations?
Change management is not an individual function or a top-down command-and-control environment. It’s really a mindset shift for everybody involved: project management folks, business analysts, workstream leaders, and even the people doing the heavy lifting around data and data migrations.
If everybody on the team has the same mindset of—and commitment to—understanding the impact and risks of each step as well as recommending how to bridge gaps or solve for what will likely be expected resistance, then you’re a step ahead.
It’s a team sport, not an individual role.
As companies implement ERP solutions, how do they often react when they find out it’s actually much more complicated than the original plan envisioned?
A typical implementation will start out with a defined scope and budget. After you get through the design, you usually need a second baseline because some things have moved into scope while others got pulled out.
You almost need to build some level of contingency budgeting upfront as well as more timing for the ability to shift things out of scope, especially if you’re facing a critical timeline or deadline, or plan an IPO or SPAC, for example.
You need better use of your peripheral vision when planning. Build in contingencies upfront because changes will happen.
How do ERP implementations change organizations internally and externally?
There’s considerable impact on organizational design with shifting of responsibilities from the back office extending all the way to the super users, system administrators, as well as drivers of new features and functionality.
It’s obviously great to be in conversations with your clients upfront at the beginning so you build in those contingencies for the unknowns that will inevitably occur. It’s also important to help clients throughout the entire lifecycle. For example, maybe your users weren’t adequately prepared for the change, so there’s a need for additional training or optimization.
There are also events that can happen in your business potentially causing disruption, so longer-term planning is needed. The bottom line is that your ERP implementation has to work in a living, breathing environment and adapt as your business changes. And it will change. The question is whether your systems can keep up. That’s the challenge—but it’s also the opportunity if done right.